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Banks tighten credit stance

By Kofi Ahovi
A Credit Conditions survey conducted by the Bank of Ghana in May this year indicates that universal banks have tightened their credit stance for both enterprises and households.

This, according to the survey, was as a result of an increase in cost of funds, strict collateral requirements and inflation expectations.

This notwithstanding total private sector credit increased by 37.4% on an annual basis to GH¢9.3 billion in April 2012. This compares favourably to a growth of 17.3% in the same period of 2011. In real terms, private sector credit growth was 25.9%.

Meanwhile, total assets of the banking industry increased by almost 21%, on year-on-year basis, to GH¢23.2 billion in April 2012.

The growth in assets was funded mainly by deposits, which went up by 29.1% to GH¢16.9 billion, and net worth which recorded a 20.8% growth to GH¢3.1 billion. Of the total net worth, GH¢206 million was from bank recapitalization.

The financial soundness indicators of the banking industry remained strong. The Capital Adequacy Ratio (CAR) was well above the 10% threshold but declined to 16.8% at the end of April 2012, compared to 18.1% in April 2011. The asset quality of the banking system improved as the Non-Performing Loan (NPL) ratio declined to 14.1% in April 2012, from 17.4% in April 2011. Earnings performance also improved.

Growth in broad money supply (M2+) slowed to 30.1% in April 2012 compared to 41.5% a year ago. The source of change in M2+ was a 51.5% growth in the Net Domestic Assets (NDA) of the banking system.

Interest rates, on the other hand, continued to trend upwards in the year to May 2012. Cumulatively over the first five months: The 91-day T-bill rates increased to 19.4% while the 182-day T-bill rates went up to 20.2%. The average rates on the 1-year note went to 20.5% and the 2-year fixed notes to 21.2%.

The rate on the 3-year fixed bond increased to 24%, while the 5-year fixed bond rate was unchanged at 14.3%.

The average savings deposit rates increased by 45 basis points to 5.5% in May 2012, while average base rates of banks declined to 20.6% from 22.4% in the same period. The average lending rate declined to 25.9% in May 2012, from 27.5% a year earlier while the Annual Percentage Rates (APR) of banks declined by 47 basis points to 28% in May 2012, relative to a year earlier.

The interbank overnight rate rose to 13.3% in May, from 8.1% in January 2012.

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